Global Insight Perspective | |
Significance | In its fourth year since launching services in November 2001, Cell C has maintained a 10% share of the South African market. It has a 9% share of the pre-paid market, and increased its share to 15% of the post-paid market. |
Implications | Cell C reached an important milestone during 2005, as having becoming EBITDA positive on a monthly basis in May 2004, it has now become EBITDA positive for the year. |
Outlook | Cell C expects to expand its market share through its 50% share in the mobile virtual network operator (MVNO) Virgin Mobile South Africa (VMSA), which will launch services in the second quarter of the year. |
Cell C reported 2,919 million active subscribers as at 31 December 2005, a revised figure from the total of 3.2 million previously reported. This gives it a 10% share of the South African market of 31.005 million subscribers as at 31 December 2005. The operator lies in third place behind Vodacom and MTN; Vodacom was in first place with 17.570 million subscribers, and MTN in second place with 10.235 million.
Cell C’s overall market share has remained unchanged over the course of the year. With 2,176,678 subscribers as of 31 December 2004, the operator had a 10% share of the total market of 21.929 million. However, Cell C is winning a greater share of the more lucrative post-paid market, saying that it achieved a 20% share of the net post-paid additions during the year, and now has a 15% share of the post-paid market. This fact, together with a high proportion of subscribers from the high use of community service telephones (public GSM payphones), meant that Cell C’s ARPU actually increased over the year, while that of the other two operators decreased.
Cell C, Key Financial and Operational Statistics 2004 - 2005 | |||
% Y/Y Growth | 2005 | 2004 | |
Revenue (ZARm) | 34.1% | 5,500.3 (US$908.3m) | 4,101.2 (US$677.3m) |
EBITDA (ZARm) | 1,049.0% | 442.4 | (46.6) |
ARPU (ZAR) | 3.5% | 147 | 142 |
Total subscribers | 34.1% | 2,919,112 | 2,176,678 |
- Pre-paid | 30.2% | 2,216,777 | 1,701,960 |
- Post-paid | 45.2% | 667,247 | 459,589 |
- Community service telephones | 131.9% | 35,088 | 15,129 |
Outlook and Implications
Cell C is set to increase its market share through the 50:50 joint venture, Virgin Mobile South Africa (VMSA). The operator concluded agreements with U.K.-based conglomerate Virgin last year to establish the MVNO. 'Our partnership with Cell C will bring a new approach to the mobile market and will be a refreshing alternative from the bland offerings of other players,' said Sir Richard Branson, chief executive officer (CEO) of Virgin, adding: 'I am looking forward to coming to South Africa to launch this exciting new business.' Virgin Mobile South Africa is planning to target the top end of the market, according to its CEO, and hopes to win a 10% market share within five years. As Cell C holds a 50% share in the MVNO, this will significantly increase its share of revenues.
The year ahead will also bring regulatory change, as the operator prepares to meet the challenges of the new Electronic Communications Act (formerly know as the Convergence Bill). Cell C said that when this becomes law, it expects to convert its current mobile licence into two new licences, a Communications Network Service Licence and a Communications Service Licence. ‘As a business, we believe we are well placed to take advantage of the impending regulatory changes which will enable us to compete even more vigorously for subscribers in an increasingly complex but continually growing market,’ said Talaat Laham, Cell C chairman and CEO.